Senate, House Bills Would Block July 1 Cut in Physician Fees

Both bills would buy time for Congress to come up with a long-term solution to the payment problem. The current fee update formula has triggered negative updates for most of this decade and will keep doing so well into the next.

The physician fee cut of 10.6 percent, set for July 1, is higher than the one blocked earlier this year (10.1 percent), CMS says, because the law requires that the conversion factor for periods after June 30 “must be computed as if the legislated increase for the first half of 2008 had never applied.” For 2009, CMS estimates, payments would drop by another 5.4 percent under the SGR formula.

Bills have been introduced in the House and the Senate to prevent a 10.6 percent cut in Medicare payments for pathologists and other physicians due to start July 1 and assure a modest increase for the next 18 months. Congress late last year staved off a 10.1 percent cut set for the first of this year and approved a 0.5 percent increase through June 30.

The Senate bill—S. 2785, introduced March 13 by Debbie Stabenow (D-Mich.)—would replace the looming fee cut with a 0.5 percent increase for the rest of this year and a 1.8 percent increase for 2009. The American Medical Association supports the bill, saying it hopes the measure will be a basis for action by the Finance Committee.

The House bill—H.R. 5445, introduced February 14 by Georgia Reps. Tom Price (R) and David Scott (D)—would block the impending cut and grant an increase of one percent for the remainder of this year and 1.8 percent for 2009.

The House and the Senate this month approved budget resolutions for fiscal 2009 with reserve funds for a Medicare physician fee fix, though the amount is not specified. The funds would become available only if the committees of jurisdiction enact spending offsets elsewhere, as required under pay-as-you-go rules. The budget blueprints are guides for lawmakers and are not binding.

The President’s FY 2009 budget request, released February 4, was silent on the physician pay issue, but proposed a deep cut in Medicare spending, mostly from lower payments to hospitals and other Part A institutional providers; labs were spared, though national lab competitive bidding was proposed. Democratic health leaders have said they will not go along with the proposed Medicare reductions.

The health leadership also dismissed Medicare spending reductions advanced by the Bush administration on February 15 to bring program outlays in line with a target established by the 2003 Medicare Modernization Act. The act requires the President to propose, and Congress to consider, legislation to rein in Medicare spending when the general revenue portion of the program’s financing exceeds 45 percent. That provision was triggered last year when the Medicare Board of Trustees reported that this threshold would be reached in FY 2013. In response, the White House proposed to lower spending by charging higher-income beneficiaries more for Medicare prescription drug coverage, capping medical malpractice awards, and injecting more consumer control and efficiencies into the program.

The AMA, the College of American Pathologists, and other physician groups want Congress to repeal the Sustainable Growth Rate (SGR) formula used to update Medicare physician fees each year. The big question is how to pay for a long-range solution, let alone a short-term one. Even the fix through 2009 authorized in the newly introduced House and Senate bills would cost billions. The Stabenow bill could cost as much as $15 billion over five years, health care analysts have estimated.

Paying for a physician fee increase is the thorny issue that led to the current six-month fix after House and Senate negotiators failed to agree on where to find the money. House Democratic health leaders favor tapping funds from Medicare managed care, noting that Medicare Advantage (MA) plans get rates 12 percent higher than traditional Medicare. The House last year reduced MA payments to 100 percent of fee-for-service levels, but this provision was stripped from the final compromise Medicare, Medicaid & SCHIP Extension Act passed in late December. The White House and most congressional Republicans, along with private health plans, continue to oppose reductions in the MA program. Meantime, MA payments are due to rise an average 4.8 percent in 2009, according to a preliminary estimate by the Centers for Medicare & Medicaid Services. The final figure, to be announced by May, could be higher or lower depending on final data calculations.

The political dynamics also mean that other Medicare providers would likely be tapped to finance the physician fee fix. And this prospect has made clinical laboratory interests heighten their vigilance to protect Medicare lab fees, currently set to emerge from a five-year freeze at the beginning of 2009. Absent congressional intervention, lab fees are due for a Consumer Price Index update next January 1, the first increase since 2003.